Food delivery service Deliveroo says demand for orders has strengthened despite coronavirus restrictions easing.
The number of Deliveroo orders and transaction value has doubled in the first half of this year, with 148.8 million in total. In other good news, the firm also reduced pre-tax losses from £128.4m last year to £104.8m. These are the first results since the company floated on the stock market in March.
On the firms first day of trading shares dropped sharply, after originally listing on the London stock exchange at 390p each. The news improved on Monday following German rival Delivery Hero buying a 5% stake in the company worth £284m. However, it went down 3.3% on Wednesday to 351p.
Deliveroo orders soared during the early stages of the pandemic as cooped-up customers flocked to use the service. During this time people shifted to home deliveries as restaurants remained closed. The company predict customer behaviour will switch back later in the year, but is remaining “excited about the opportunity ahead”. Its outlook for the rest of the year is “optimistic but prudent, combining confidence in continued year-on-year growth in orders with an expectation that average order values revert towards pre-pandemic levels”.
Strong growth
Deliveroo’s gross transaction value for the six months was £3.4bn, which is a 99% increase from the same time in 2020. The firm forecast the value for the whole of 2021 will rise 50% to 60% above last year.
Will Shu, the founder and chief executive of Deliveroo says: “We are seeing strong growth and engagement across our marketplace as lockdowns continue to ease”. He says demand is still high, and they have widened their consumer base. People are continuing to place frequent orders, and the firm now “work with more food merchants than any other platform in the UK”. Alongside this, more riders are choosing to continue with the company as they value the work offered.
Analysis
Food delivery companies are some of the big winners of the pandemic as people turned to takeaways when restaurants closed. However, it is uncertain how much of the surge in business will endure as restaurants reopen.
Deliveroo says orders are “proving resilient” since the hospitality industry returned, but does not expect it to last forever. It is likely that things will eventually return to normal pre pandemic levels. Although the company has diversified to delivering groceries for stores such as Co-Op, Aldi and Waitrose.
As Rishi Sunak says, Deliveroo is a “true British tech success story”, but is not a financial success yet. Even though business largely increased over the last year, the company still did not make a profit. Losses are less than last year, but the firm still ended the first half of this year in the red. If it can’t make a profit when dining out isn’t allowed, when can it?
Deliveroo are ahead of plans by now covering 72% of the UK population, and operate in 11 countries across the world. Despite stiff competition from rivals Uber Eats and Just Eat, Deliveroo appear to dominate the takeaway delivery market.
However, investors seem to have lost their appetite for shares in early trading. At the same time, forecasts predict business will reduce as the year goes on. Speculation grows about the potential of Deliveroo to become a target for takeover.
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